VA appraisals and VA inspections are often confused, but they are different. A VA appraisal is similar in some ways to the appraisal with a conventional mortgage, but they do more to protect buyers.
We look at a home's requirements when applying for a VA loan. There are VA loan inspection requirements for appraisals that buyers, sellers, and real estate agents should know.
The VA doesn't require a home inspection, though they are usually recommended. An appraisal is required to check that the home's value matches the price the buyer is willing to pay.
As well as ensuring that more money isn't being loaned than the home is worth, they also want to know that the home meets the VA’s minimum property requirements.
A VA appraisal assesses the fair market value of the home. This ensures the home is worth enough, so the lender does not lose money if the borrower defaults.
As well as assessing the home's value, the appraiser must check that the property is safe, sound, and sanitary.
This means checks are done to ensure that the property will be safe to live in for the veteran and that it is unlikely to need any expensive repairs soon.
The FHA also has similar property condition standards that must be met.
An appraisal for the VA isn't much different from an appraisal with a conventional loan. In both cases, the property will be compared to similar homes sold recently in the same area.
The difference between these appraisals is the VA’s requirement for the home to meet minimum property condition requirements. These minimum property requirements benefit buyers to ensure they aren't buying homes with hidden problems.
The Department for Veterans Affairs has minimum property requirements (MPRs) to ensure that veterans aren't buying a home that isn't safe, sound, and without adequate sanitation.
Buyers and sellers should always understand these requirements before putting a house under contract.
Let's look at the MPRs that VA inspectors use to assess the condition of properties:
The home must have sufficient room for the family buying the property. This means enough bedrooms, bathrooms, and cooking and dining areas. This doesn't necessarily mean a large home, just one big enough to meet the family's needs.
The home or outbuildings must not encroach on neighboring properties. This means that no part of the home should be built on land, not part of the property.
A property encroachment can stop a sale. There are resolutions that can be made, including clearing up the violation or granting the owner an easement for the encroachment.
The VA inspection will ensure that the home has permanent street access. A permanent easement must be made if it is on a private road.
VA loan inspection requirements mean the property cannot be at risk from natural hazards or environmental contamination.
The home cannot be built in a flood zone, and the inspector will check for signs of possible sinkholes. They might also run tests for radon gas, lead-based paints, and asbestos in the home.
Anything that might affect the home's structural soundness or harm people's health will be considered a hazard.
The home's structure needs to be sound, with a roof that prevents moisture from entering. The roof needs to be good enough to not require replacement for at least 3 years.
Basements and attics should not have mold, mildew, dry rot, or suffer from pest damage or infestations. Accessing these parts of the home should also be easy, and they need adequate ventilation.
The home must have continuous access to safe drinking water for all uses. There must be hot water and sanitary facilities for all family members. Sewage must be safely disposed of.
If a well services the home, it must be inspected. The VA wants to ensure the quality of the water is adequate.
There should not be any pooling of water around the foundations. If there isn't suitable drainage on the site, the appraiser will report this problem.
One of the most common problems with VA condition requirements is peeling paint. The VA will not accept homes with flaking or peeling paint built before 1978.
Either the buyer or seller will need to address the paint.
The home needs to have adequate access to electric and gas supply, as well as functioning HVAC systems.
Homes with swimming pools can be financed using VA loans, but they must be in good working order. If the pool presents a hazard or defects, it could risk the home meeting the minimum property requirements.
When the VA appraiser flags issues, they will be asked to return for a re-inspection when the problems have been corrected.
They will then report back to the mortgage lender verifying the same. Closing will not be able to take place without the completion of the flagged items.
Sellers cannot offer concessions with these loans to make the problem disappear.
VA loans are excellent for those who have served our country. While they are a bit more strict than conventional loans, most requirements are not cumbersome.
However, it is essential to realize that when an owner is selling as-is, it will be the buyer's responsibility to address any issues that have been flagged.
All the parties should be on the same page about this before a contract is accepted.